Supply Chain Geopolitical Risk

Supply chain geopolitical risk is the possibility that your supply chain is disrupted by global political events. The most obvious and high profile are wars and revolutions, but even the less dramatic can cause serious consequences for businesses.

Geopolitical Risk Example: Egypt and the Arab Spring

In 2010, Egypt won the European Outsourcing Association award for Outsourcing Destination of the Year. Soon after, the Arab Spring and the 2011 Egyptian revolution resulted in hundreds of deaths, a military assumption of power and a military coup.

At various points during the years following 2010, many manufacturers had to suspend operations in the country. GM stopped operations at its Cairo-area plant because of concerns over the safety of its workers. Daimler stopped production at its Egypt plant, and even requested that expatriate employees return home to Germany. And BMW shut down its assembly lines in Egypt.

In a world of increasing globalization, events such as these show that geopolitical risk is becoming more and more relevant when it comes to managing supply chains.

3 Things To Know

1. Geopolitical Risks Vary Widely

For obvious reasons, wars and revolutions get the most attention when it comes to geopolitical risk. However, that doesn’t mean this is the only kind of geopolitical risk that exists. There are also larger, more slow-acting trends that can affect your supply chain—for example, an increase of protectionism that might result in changing tariffs.

2. It's Not Impossible To Predict Geopolitical Risk

The example of Egypt demonstrates that it can be hard to predict geopolitical risk. However, it’s not impossible—there are indicators that can give early warnings. If you’re not making an attempt to monitor these, then you’ve got a big hole in your supply chain risk management strategy.

3. Impact Analysis Is Essential

It’s one thing to monitor locations or geographic regions so that you stay on top of any geopolitical situations that might arise. However, it’s something entirely different to fully understand the impact of what those geopolitical situations might have on your supply chain. Make sure you know not only what’s going on—but how much it means to your specific business.

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